Schedule a “Plan Date” with Your Finances

Lets take a few minutes this month to discuss planning – or as we call it Prosperity Planning™. When we take a step back for a minute, it is quite astonishing to think of everything we plan for. We make plans for dinner, lists for the grocery, and schedules for kitchen duty at the office. Kids even have what are called “play dates”, or a structure preplanned time to play with someone. Regardless of how hard we desire to break loose from structure, it is always upon is and often growing.

We live in a world with so much planning and structure, yet we tend to forget or ignore some of the most important planning of all – our financial future. Stop and ask yourself these three questions:

1) What goal requires me to need the level of salary that I am receiving?

2) What goal requires me to be placing $x,000 into my 401(k) and IRAs each month?

3) What goal should the risk on my investment portfolio ultimately be leading to?

Chances are you, like many others struggled to answer at least one if not all of those three questions. Without a goal or a standard of measurement it is more challenging to earn, save, and deal with risk. Perhaps you are actually saving more money than necessary for your future and could go to a lesser paying career in the field that you really love.

The questions you ask your financial advisor and the questions he or she asks you should empower and create understanding. Never enter into an investment program without understanding why and how that program is good for you. Likewise, a good financial advisor will be very skeptical about taking on clients who are not willing do disclose their goals and finances. Most of us will admit that the choices we made in the past got us to where we are today. Shouldn’t the choices we make now get us to where we want to be tomorrow?

Taking the initiative to begin exploring your financial future should start early, as it will also bring you greater contentment with your life now. The questions you or your advisor ask yourself should have very little to do about asset allocation, stocks and bonds, or risk. This process is about you and your family, not market relative investment returns. Consider these three questions:

1) How much money will enable me to live a happy retirement and am I saving enough to get there?

2) Can we build the lakehouse when we retire?

3) Would my child’s college still be paid for if I began to take pilot’s lessons next week?

Questions such as these give answer and meaning to the process of accumulating wealth and achieving a sense of personal prosperity. If you are going to save money in your 401(k), shouldn’t you know exactly how much you should be saving? Our lives are full of choices, each accompanied by their own opportunity costs. Aside from the super-affluent, many of us will find that there are tradeoffs to be decided upon. By going “goal shopping” you can determine what things are important to you. Would you retire 2 years earlier than expected if it meant you had $5,000 per year less spending money during retirement? Some people would jump at that opportunity while others would quickly say “No Way”.

To successfully develop such goals and dreams, you should start as early as possible, or at least prior to retiring. As an example let’s look at John & Mary Smart. While they made choices about their life, they worked with an advisor to determine the impact of their choices on their financial future. This means they know with good probability that their plan will succeed, however they also know that they aren’t sacrificing too much today, such as vacation money or any of the things that they like doing today.

John and Mary are indeed smart, as they know exactly how much money they are working to accumulate, how much they need to save to do it, but more importantly what that money will mean for them in 10 years when John and Mary are retired. They enjoy saving money and stay the course because they know exactly what kind of retirement life it will afford them to have. They know what is important to them!

Like John & Mary, you only have one life to live and it should be filled with an abundance of joy, success, and prosperity. You probably relentlessly plan out what’s for dinner this week, or what day you are going to run your errands, so take the effort and plan out what you want for yourself and your family. The process will shine a light of understanding on the financial choices you make. By taking a few minutes to daydream about what your future looks like, you will have taken a much needed step towards a wildly prosperous future!

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Andy is Mackey Advisors personal finance whiz kid. Andy's specialty lies in his ability to help clients craft a financial plan that works for them. He is passionate about helping people create a brighter and more prosperous future.